Chinese stocks just staged a massive rally and ended the 5-day sell-off

After looking as if they were going to make it six losses from
six sessions, Chinese stocks staged a ridiculously large rally in
the final 45 minutes of trade, closing Thursday’s session with
mammoth gains of over 5%.

The benchmark Shanghai Composite index, having traded higher for
most of the session, looked as if it would fall yet again into
the close, slipping into negative territory with less than an
hour to trade.

Then, just when it looked as if all hope were lost, it began to
surge higher, then higher, and then higher again.

In the space of just 46 minutes, the index staged a turnaround of
6.11%, eventually closing the session up an enormous 5.39%.

It was ridiculous, and it reeked of government intervention.

Business Insider Australia

Whatever the reason, it was the largest one-day percentage
increase since July 9, and it trimmed the index's weekly loss to
only 12.04%.

Yes, it's been that kind of week.

Unsurprisingly, all sectors finished in the black, with
financials, up 6.16%, leading the charge higher.

Given chatter on Wednesday that government-backed bodies —
China's so-called national team — were buying heavily in
state-owned banks, this fits with the theory that the government
was most likely responsible for the breakneck late rally.

As was the case on Wednesday, large-cap stock indexes
outperformed their smaller peers.

The SSE 50, made up of large-cap stocks listed in Shanghai,
surged by 7.87%, while the CSI 300 added an equally impressive
5.95%.

While they lagged their larger compatriots, the CSI 500, Shenzhen
Composite, and ChiNext indexes — brimming with small-cap stocks —
all rose by over 3%.

Business Insider Australia

So the five-day, 20%-plus losing streak for stocks has come to a
spectacular end.

With the benchmark Shanghai Composite index still down 40.42%
from its June 12 peak, however, it is unlikely to convince many
that the rout in stocks is over.

One day does not make a trend, and there is little doubt that
extreme oversold conditions, coupled with likely government
intervention, played a significant role in the late rally on
Thursday.

It will be interesting for many observers to see whether the
extreme gains can be sustained through the end of the week.